Every permanent employee of San Luis Obispo County is required to become a member of the San Luis Obispo County Pension Trust. Each member contributes a percentage of his/her salary to the Pension Trust; members can also make voluntary contributions. The employer also contributes a percentage of each member’s salary to the Pension Trust. Contributions made to the Pension Trust during marriage are considered community property and are subject to division under California law due to divorce or legal separation. The court order used to divide these retirement benefits is called a Domestic Relations Order or DRO. Under the DRO, the employee is called the “member” and the non-employee former spouse is called the “Alternate Payee”.
JOINDER REQUIREMENT FOR SLO COUNTY PENSION TRUST
The San Luis Obispo County Pension Trust must be joined before a DRO can be implemented. Joinder is a legal process that names a third-party claimant to a divorce case; the Pension Trust is a third-party claimant to any dissolution case which involves San Luis Obispo County Pension Trust benefits. The joinder will put the Plan on notice of the pending dissolution action and forthcoming DRO, and will give the court jurisdiction over the SLO County Pension Trust. Often divorce attorneys file the joinder as part of the dissolution proceedings. However, if needed, QDRO Helper can file the necessary joinder documents for you for an additional fee.
METHODS OF DIVISION
There are two basic methods utilized for dividing San Luis Obispo County Pension Trust benefits for active or reserve members. There is only one option for dividing the benefits of a member who has already retired. The methods of division are described below.
Method 1: Payout of the Alternate Payee’s Share at the Time the Member Retires or Dies
Under the first method of division, the Alternate Payee will receive a portion of each payment made to the member, or upon the member’s death, based upon his/her community property interest. Payments will only commence to the Alternate Payee either 1) upon the Member’s actual retirement or 2) upon the death of the Member. Typically, the Alternate Payee’s share is determined using the “Time Rule” formula, i.e. the Alternate Payee will receive 50% of the Member’s monthly retirement allowance multiplied by a fraction where the numerator is the Pension Trust Service Credit attributable to the Member’s employment during the marriage (from date of marriage through the date of separation), the denominator is the total of the Member’s Pension Trust Service Credit at the Effective Date of Retirement.
Under this method of division, the DRO may order the Member to elect a payment option that provides a survivor benefit annuity to the former spouse. The Optional Settlement that is to be elected by the Member must be specifically named in the DRO. There are 4 optional settlements that will allow for benefits to be paid to the former spouse upon Member’s death, aptly named Optional Settlement 1, Optional Settlement 2, Optional Settlement 3, and Optional Settlement 4. If the Member chooses and “Unmodified Retirement”, there are no survivor benefits and all payments to the Alternate Payee will cease upon the Member’s death. More information on the options available can be obtained by contacting the San Luis Obispo County Pension Trust.
Under method 1, if the Member ceases working for SLO County and elects to receive a refund of his/her contributions (which will not include contributions made by the employer), then the Alternate Payee would receive his/her share of the refunded contributions based on the formula specified in the DRO.
Method 2: Separate Account Established for the Alternate Payee
The second method of division for active members order the Plan to split the member’s service credit and contributions, and to establish a separate account for the Alternate Payee. This allows the Alternate Payee to decide on his/her own retirement option (either “Unmodified” or an “Optional Settlement” that names a beneficiary) and to have more control over when payments to the Alternate Payee will commence. Even if the Member is still working, the Alternate Payee can apply for and receive a refund of his/her share of the accumulated contributions available for refund. The Alternate Payee could can “retire” and begin receiving monthly annuity payments once the Member’s interest in the plan is vested and both the Member and Alternate Payee are 50 years old. The disadvantage of this method is that the Alternate Payee will not share in any increased value of the Member’s retirement allowance due to increases in compensation before retirement. The “compensation” factor of the annuity calculation is frozen as of the parties’ date of separation under Method 2. The Alternate Payee typically will be awarded 50% of the contributions made during the marriage – from the date of marriage through the date of separation.
Method 3: For Retired Members
Similar to Option 1 above, the Alternate Payee’s share will be calculated using the “Time Rule” and the Plan will make payments to the Alternate Payee until the retired Member’s death. Benefits will only be paid after the Member’s death if the Member chose an Optional Settlement at retirement and named the Alternate Payee as the beneficiary of the Optional Settlement. The option selected at retirement cannot be changed.
QUESTIONS ABOUT DIVIDING SAN LUIS OBISPO COUNTY PENSION TRUST BENEFITS?
If you have questions about dividing Pension Trust benefits or if you would like to get started on your DRO today, please call QDRO Helper at 619-786-QDRO (619-786-7376). Click here to request a new client package for a SLO County Pension Trust DRO. We proudly serve clients throughout California – no in-office appointments are needed.
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